A Time Series Model of Interest Rates With the Effective Lower Bound
Year: 2016
Type: article
Abstract: Modeling interest rates over samples that include the Great Recession requires taking stock of the effective lower bound (ELB) on nominal interest rates. We propose a flexible time– series approach which includes a “shadow rate”—a notional rate that is less than the ELB during the period in which the bound is binding—without imposing no–arbitrage assumptions. The approach allows us to estimate the behavior of trend real rates as well as expected future interest rates in recent years.
Authors: Benjamin K. Johannsen, Elmar Mertens
Institutions: Federal Reserve, Federal Reserve Board of Governors
Language: English
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W2345145240